Regulation creating a bullet-proof investor, says advisor

by Sophie Nicholls26 Feb 2014

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Regulation creating a bullet-proof investor, says advisor

Ronald Rusnak, president of Rusnak Financial, Ltd. in Bonnyville Alta., agrees that regulation needs to deal with all affected fairly. His beef targets the push to transition advisors from commission- to a fee-based model. Rusnak feels clients should be able to decide what type of advisor they want to work with, while believing that, in the long run, the retail client with less to invest – rather than the high-net worth, more sophisticated investor – will be alienated by the fee-based model.

“Once they see what the costs are, the clients should be able to choose which direction to go, themselves,” he says. “To switch from commission-based to fee-based, the smaller client won’t get serviced because they will look at the cost and think I’ve got to pay this out of my pocket, I’ll just go and take care of it myself…” (continued.)

“The bigger clients don’t really have an issue going one way or another … They know that there are costs associated with their investments. They understand that, whereas the smaller client doesn’t understand exactly what it costs to run an office and they look at the fees and say well I don’t want to pay those fees.”

Having said this, Rusnak – who is considering offering a fusion of fee- and commission-based services to his clients – feels regulation should force those advisors making commission fees to take a greater hit when fund values decline.

“There should be something in place so that everybody absorbs some of the loss because on a trailing commission, fund managers see a drop in the commission because the value of the funds go down, but it doesn’t impact them on the rate,” he says. “If they (regulators) turnaround and show that these guys are also taking a bit of a haircut at the same time as the client is, I think it would be easier for the client to absorb.”

I think that it has become evident that we need to streamline the regulatory process and costs. Otherwise, we have redundancies and duplication of effort which may or may not actually benefit clients at all levels. To paraphrase the Mr. Scott from Star Trek 3, " the more you add to the plumbing, the easier it is to mess it up.."

It seems to me that regulators work hardest to justify their positions and any benefit to retail clients is incidental. We have so many levels of regulation that advisors spend too much time jumping through hoops and filling out forms to satisfy some obscure regulatory game with no measurable benefit to clients, and not enough time working directly for their clients.

I agree with the comments on the extra fees that are getting passed on to clients and advisor's alike, and the down loading od a tremendous amount of admin, which either paralyzes a practices to the point of being unable to do the proper planning job for the clients, or hiring more support staff and minimizing the return on time and knowledge and expenses of the advisor.

Yet, regulators get paid very well, check out the pensions they get vs, the clients, the advisor's, so it is very self serving.

It is starting to look and feel like the Income Tax act. A big machine that protects us from ourselves.

Spend some money educating the public not to make stupid mistakes and that they should not buy anything unless they know what theyknow what it is they are doing, and then let social services look after their retirement plans.